About General Payment Systems Inc.

Headquarters: Irvine

Founded: 2008

Formerly known as: Continental Prison Systems Inc.

Symbol: CPSZD (Changing to GPSI)

CEO: Ron Hodge

Employees: 25

Business: Creating kiosks and cloud-based software to automate payment collection and processing for correctional facilities and other markets. The company's products are found in more than 50 jails nationwide.

In 2008, the onetime phone-card salesman started General Payments Systems Inc., which makes ATM-style kiosks that process bail payments and cash transactions associated with booking inmates into jails. More than 50 correctional institutions nationwide, including the Orange County Jail, use Hodge's kiosks.

But hisIrvine-based company, which changed its name this month from Continental Prison Systems, is now breaking out of the corrections market and getting into the municipal payments space. The way Hodge envisions it, General Payments Systems' kiosks eventually will be the go-to payment processors for traffic tickets, utility bills, license fees and more.

“Probably 90 percent of our business is corrections now, 10 percent other. I'd say within three years, it will be reversed,” Hodge said. “There's much more volume of transactions going through cities and courts than going through corrections.”

Businesses deploy automated kiosks, which promise cost savings for companies and convenience for consumers, for a wide variety of uses, from movie rentals to grocery checkout to photo processing.

The global interactive kiosk market, as measured by vendor and manufacturer revenue, is projected to grow from $1.5 billion in 2011 to $2.8 billion by 2017, according to consulting firm Frost & Sullivan.

Analysts say there is a particular opportunity in the municipal payments market, which has been relatively slow to adopt automation technology to handle in-person transactions.

“On the municipality and local government side, the payments still tend to be very much in-person,” said Ron Shevlin, a senior analyst with research firm Aite Group. “They don't have the mechanisms and resources to build sophisticated (payment) websites.”

‘Take a jail cashless'

Hodge never intended to go into the kiosk business. The 55-year-old San Bruno native sold phone cards and debit cards in the 1990s and later took a job fixing up historic homes in the Fresno area.

In 2008, an acquaintance working for a commissary provider told Hodge about an Idaho jail looking to improve its cash management system. The correctional facility incurred substantial costs tracking the cash that inmates hand over during booking, distributing the money to inmates upon release and laterreconciling accounts when people didn't immediately cash their checks.

“It was a nightmare for the facility to manage,” Hodge said.

Hodge, who was familiar with electronic kiosks from his days using one to distribute phone cards at San Francisco International Airport, launched his company with the goal of eliminating the need for jails to handle cash. After initially setting up the company in Fresno, he relocated to Irvine in 2011 in part to serve one of his large clients, Orange County Jail.

Typically, when suspects are jailed, they empty their pockets and someone must count the cash, verify it and recount it, often multiple times. The process can be time-consuming and the money is vulnerable to theft.

With General Payment Systems' machine, bills and coins can be fed into a kiosk, which gives a paper receipt and eliminates the need for counting. Upon an inmate's release, the money is placed on a prepaid debit card.

Colorado's Boulder County Jail estimated that using a kiosk saved the facility nearly $166,000 in man-hours in 2010.

The machines offer other conveniences as well, including instant electronic bail payments. Using an Internet connection, the kiosk can send a message to family members, alerting them of an arrest and providing a web address where they can post bail electronically.

The kiosks also can be used to transfer money to a spending account that an inmate can use to purchase snacks or other commissary items or to buy phone time.

“We go in and take a jail cashless,” Hodge said. “We collect, service the machine, process it all and integrate with their jail management system so that money is populated onto the inmate's account so he can use it for spending.”

New markets

Hodge said he funded the early growth of General Payment Systems through “friends, family, credit cards, blood, sweat and tears.”

The company, which derives its revenue from kiosk transaction fees, provides the machines free of charge, leading to high capital costs. General Payment Systems had a net loss of $1 million last year on more than $4 million in revenue, according to filings with stock marketplace OTC Pink.

Still, Hodge's company, which has 25 employees, is growing. This month, General Payment Systems has announced deals to provide kiosks to jails in Nevada and Virginia. To date, the company has delivered 150 kiosks and has orders for 40 more.

To support the growth, General Payment Systems is in the process of raising capital. Due to regulatory restrictions, Hodge could not discuss the effort, but the company this month went through a 1-100 reverse stock split to boost the stock price in anticipation of a deal.

The company has its eye on churches, charities and other organizations that handle cash. But the company's primary focus is the potentially lucrative municipal payments market.

The city of Lynwood, which installed two of the company's kiosks this year to accept water bill payments, was an early adopter. Previously, the city only accepted in-person payments at city hall four days a week during business hours.

“Now, with these kiosks … it's available to customers after-hours and on the weekends,” said Edwin Hernandez, Lynwood's city treasurer. “It's a great service for the community.”

He said usage has increased steadily as more residents have become aware of the machines. About 500 people pay their bills at the kiosks each month.

The city is in the process of integrating the machines with the system for collecting parking enforcement fines.

“Eventually my goal will be to get every bill paid there,” Hernandez said.

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